Question

Bill Penny has a repetitive manufacturing plant producing trailer hitches in Arlington, Texas. The plant has an average inventory turnover of only 12 times per year. He has therefore determined that he will reduce his component lot sizes. He has developed the following data for one component, the safety chain clip:Annual demand = 31,200 units Daily demand = 120 units Daily production (in 8 hours) = 960 unitsDesired lot size (1 hour or production) = 120 units Holding cost per unit year = $ 12 Setup labor cost per hour = $ 20